Calculation method changed on db pension for early retirement

Gary1984

It's really got nothing to do with the administrators how the early retirement factor is calculated. As others have said it's for the Trustees following advice from the actuary. New administrators would have no impact (unless they've spotted an error in the original quote). It's a very simple calc unlike CETVs so see if you can get them to show their working.

toolateforsums

xylophone said:

What method was used to calculate that the pension would be £35,000 pa at Normal Scheme Retirement Age?

Yes, exactlly that . NRA being 65

toolateforsums

Marcon said:

Dazed_and_C0nfused said:

toolateforsums said:

zagfles said:

toolateforsums said:

Dazed_and_C0nfused said:

Then the fun starts. I then asked for a new db quotation to take in just over a years time , and am told that they have changed the calculation. I would now only receive a pension of 14k PA as they have changed pension administrators who didn't like the way early retirement was calculated

Do you really mean they changed the calculation or was it that the original calculation is now believed to be wrong?

This sort of thing will be set by the scheme rules - have you checked those?

They have changed the calculation method. The trust deed and rules state :

'The Deferred Member’s pension under this Rule 4.9A shall be the deferred pension to which he or she would have been entitled to on Normal Retirement Date under Rule 4.8 (Deferred Pension) reduced by the Early Retirement Discount.  '

'The Early Retirement Discount which will apply initially, on and from 1 October 2011, until the Trustees determine otherwise (having had regard to the Actuary’s advice), will be 4% for each complete year that the payment of the deferred pension precedes Normal Retirement Date'

That is how my original quotation for 21k pa was calculated. Very clear in the rules.

So the rules look like they allow the Trustees to change the early retirement discount.

I have checked and the 4% still applies for every year before NRD

Is this a deferred DB pension or one that you were still accruing additional pension?

Maybe the issue is with the starting point of the calculation not the actuarial reduction.

What was the initial 35k actually based on?

What's the betting:

• the first quote was based on revaluing (on a 'best guess') to NRD, then reducing that figure
• the current quote which was based on revaluation to the date on which OP asked for the quote, then reducing that figure?

Very clear in the rules that the Trustees can change the 4% after taking advice from the Actuary - but not at all clear which method is required to get to the starting (i.e. pre-discounted) figure.

From the trustee secretary: -

'On checking your file and reworking the calculations, done when XXXXXXXX were the administrator, it is clear that they based the Early retirement pensions on your estimated pension at Normal Retirement Date and then reduced it by the 4%.

 

YYYYYYYY, as the new administrators, have challenged this method and their administration and calculation system was set up under instruction from the Actuary to revalue only to the early retirement date. The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Clearly a change in the calculation method and a significant one since changing scheme administrators.

hyubh

toolateforsums said:

From the trustee secretary: -

'On checking your file and reworking the calculations, done when XXXXXXXX were the administrator, it is clear that they based the Early retirement pensions on your estimated pension at Normal Retirement Date and then reduced it by the 4%.

 

YYYYYYYY, as the new administrators, have challenged this method and their administration and calculation system was set up under instruction from the Actuary to revalue only to the early retirement date. The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Clearly a change in the calculation method and a significant one since changing scheme administrators.

It appears this trustee secretary has been taking tips from recent defenders of Boris Johnson. What the new administrator thinks would save money on implementing the scheme is neither here nor there, ditto whether the rules of the scheme are 'most unusual' or not. I'd ask the trustee to reconsider, and if they don't, raise a formal complaint (IDRP) about the (apparently acknowledged) recalculation contrary to established understanding of scheme rules...

DT2001

toolateforsums said:

Marcon said:

Dazed_and_C0nfused said:

toolateforsums said:

zagfles said:

toolateforsums said:

Dazed_and_C0nfused said:

Then the fun starts. I then asked for a new db quotation to take in just over a years time , and am told that they have changed the calculation. I would now only receive a pension of 14k PA as they have changed pension administrators who didn't like the way early retirement was calculated

Do you really mean they changed the calculation or was it that the original calculation is now believed to be wrong?

This sort of thing will be set by the scheme rules - have you checked those?

They have changed the calculation method. The trust deed and rules state :

'The Deferred Member’s pension under this Rule 4.9A shall be the deferred pension to which he or she would have been entitled to on Normal Retirement Date under Rule 4.8 (Deferred Pension) reduced by the Early Retirement Discount.  '

'The Early Retirement Discount which will apply initially, on and from 1 October 2011, until the Trustees determine otherwise (having had regard to the Actuary’s advice), will be 4% for each complete year that the payment of the deferred pension precedes Normal Retirement Date'

That is how my original quotation for 21k pa was calculated. Very clear in the rules.

So the rules look like they allow the Trustees to change the early retirement discount.

I have checked and the 4% still applies for every year before NRD

Is this a deferred DB pension or one that you were still accruing additional pension?

Maybe the issue is with the starting point of the calculation not the actuarial reduction.

What was the initial 35k actually based on?

What's the betting:

• the first quote was based on revaluing (on a 'best guess') to NRD, then reducing that figure
• the current quote which was based on revaluation to the date on which OP asked for the quote, then reducing that figure?

Very clear in the rules that the Trustees can change the 4% after taking advice from the Actuary - but not at all clear which method is required to get to the starting (i.e. pre-discounted) figure.

From the trustee secretary: -

'On checking your file and reworking the calculations, done when XXXXXXXX were the administrator, it is clear that they based the Early retirement pensions on your estimated pension at Normal Retirement Date and then reduced it by the 4%.

 

YYYYYYYY, as the new administrators, have challenged this method and their administration and calculation system was set up under instruction from the Actuary to revalue only to the early retirement date. The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Clearly a change in the calculation method and a significant one since changing scheme administrators.

I took my DB pension early, in 2011, and had two quotes about 6/9 months apart and they differed by about 20%. New administrators/actuaries decided the original calculations were too generous re GMP and after legal advice confirmed the new method would stand. They didn’t advise everyone of the change as “it would confuse more than it would enlighten”! Again legal advice said that was OK.

Did you get any breakdown in your redundancy paperwork about the effect on your pension?

You can ask to see the rules to check how ambiguous they are.

xylophone

The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Presumably this is a direct quote from the Trust Deed and Rules?

'The Deferred Member’s pension under this Rule 4.9A shall be the deferred pension to which he or she would have been entitled to on Normal Retirement Date under Rule 4.8 (Deferred Pension) reduced by the Early Retirement Discount.  '

What exactly does Rule 4.8 have to say concerning NRD and the calculation of the deferred pension at that date?

Thrugelmir

hyubh said:

toolateforsums said:

From the trustee secretary: -

'On checking your file and reworking the calculations, done when XXXXXXXX were the administrator, it is clear that they based the Early retirement pensions on your estimated pension at Normal Retirement Date and then reduced it by the 4%.

 

YYYYYYYY, as the new administrators, have challenged this method and their administration and calculation system was set up under instruction from the Actuary to revalue only to the early retirement date. The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Clearly a change in the calculation method and a significant one since changing scheme administrators.

It appears this trustee secretary has been taking tips from recent defenders of Boris Johnson. What the new administrator thinks would save money on implementing the scheme is neither here nor there, ditto whether the rules of the scheme are 'most unusual' or not. I'd ask the trustee to reconsider, and if they don't, raise a formal complaint (IDRP) about the (apparently acknowledged) recalculation contrary to established understanding of scheme rules...

Not a question of saving money. More a question of the solvency of the scheme at the current time to meet it's projected future liabilities. Future funding being entirely dependent upon on the scheme sponsor . 

https://www.thepensionsregulator.gov.uk/en/document-library/codes-of-practice/code-3-funding-defined-benefits-/#3b9aa4771dbb428f8bde6e829c3d3a6c

toolateforsums

xylophone said:

The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Presumably this is a direct quote from the Trust Deed and Rules?

'The Deferred Member’s pension under this Rule 4.9A shall be the deferred pension to which he or she would have been entitled to on Normal Retirement Date under Rule 4.8 (Deferred Pension) reduced by the Early Retirement Discount.  '

What exactly does Rule 4.8 have to say concerning NRD and the calculation of the deferred pension at that date?

I don't have site of rule 4.8 i'm afraid

toolateforsums

Thrugelmir said:

hyubh said:

toolateforsums said:

From the trustee secretary: -

'On checking your file and reworking the calculations, done when XXXXXXXX were the administrator, it is clear that they based the Early retirement pensions on your estimated pension at Normal Retirement Date and then reduced it by the 4%.

 

YYYYYYYY, as the new administrators, have challenged this method and their administration and calculation system was set up under instruction from the Actuary to revalue only to the early retirement date. The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Clearly a change in the calculation method and a significant one since changing scheme administrators.

It appears this trustee secretary has been taking tips from recent defenders of Boris Johnson. What the new administrator thinks would save money on implementing the scheme is neither here nor there, ditto whether the rules of the scheme are 'most unusual' or not. I'd ask the trustee to reconsider, and if they don't, raise a formal complaint (IDRP) about the (apparently acknowledged) recalculation contrary to established understanding of scheme rules...

Not a question of saving money. More a question of the solvency of the scheme at the current time to meet it's projected future liabilities. Future funding being entirely dependent upon on the scheme sponsor . 

https://www.thepensionsregulator.gov.uk/en/document-library/codes-of-practice/code-3-funding-defined-benefits-/#3b9aa4771dbb428f8bde6e829c3d3a6c

The scheme sponor is very solvent and has a repayment plan to fill the pension defecit over 10 years , reviewed every three years when a full valuation is done.

toolateforsums

I cannot help but feel that there is a deliberate intent on behalf of the scheme to reduce early retirement pensions by making them so poor your only course of action is to take it (which you wouldn't do as it is so vastly and unfairly reduced) , thus either stay in to NRD(and lose a few people along the way by them dying) , or more attractively transfer out , thus reducing the schemes long term liabilities and reducing the requirment for increased funding in the future. DB schemes are a heavy burden on many companies so the fewer people in them , the better.